Worldwide spending on the Internet of Things (IoT) is expected to reach $737 billion (£597 billion) for 2016 as organisations continued to invest in the hardware, software, services and connectivity that enable the IoT.

According to a new update to the International Data Corporation (IDC) Worldwide Semiannual Internet of Things Spending Guide, global IoT spending will experience a very healthy compound annual growth rate (CAGR) of 15.6 per cent over the 2015-2020 forecast period, reaching $1.29 trillion in 2020.

The industries expected to have made the largest IoT investments in 2016 are manufacturing ($178 billion), transportation ($78 billion), and utilities ($69 billion). IDC predicts that consumer IoT purchases – the fourth largest market segment in 2016 – will become the third largest by 2020.

Meanwhile, cross-industry IoT investments, which represent use cases common to all industries, such as connected vehicles and smart buildings, are expected to rank among the top segments throughout the five-year forecast. The industries that IDC predicts will see the fastest spending growth are insurance, consumer, healthcare and retail.

According to IDC, given the position of manufacturing as the leading IoT industry, “it’s no surprise” that manufacturing operations is the IoT use case that is thought to have see the largest investment ($102.5 billion) in 2016.

Meanwhile, in the utilities industry, combined investments in the smart grid for electricity and gas will likely total $57.8 billion for 2016. Smart home investments by consumers are expected to more than double over the forecast period, reaching more than $63 billion by 2020.

“A fairly close relationship exists between high growth IoT use cases in consumer product and service oriented verticals like retail, insurance, and healthcare,” said Marcus Torchia, research manager of IoT with IDC’s customer insights and analysis team.

He went on to add: “As a whole, the IoT opportunity is a diverse developing marketplace for vendors and end users alike.”

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